You made your dream a reality. You are the owner of a thriving, successful business and life is good. If you are living in the moment than you are just enjoying seeing all your hard work pay off, but if you are constantly looking to the future, you may be asking yourself, what should my next step be to grow my business?
Growing your business is absolutely necessary to maintain the success you have fought hard for, but the question remains, should you just grow your customer base at the current location or open a second one?
There are a lot of different factors that go into whether or not it is a sound business decision to open up a second location so you need to think about it carefully. Here’s what to keep in mind when opening a second business location:
Important Markers to Look For
Your business may be doing well, but is it doing well enough to support the opening of a second location? That is the most important question to ask. The growth markers you should be looking for include more customers than your location can handle, a really strong cash flow and you are consistently running out of inventory or don’t have enough staff or space to handle the amount of business you have coming in the door.
If this is what you are experiencing, then it is probably a good time to consider opening up a new location. If business is good, but you still have the space to grow more where you are, then you might want to wait to expand.
Will Your First Location Be Negatively Impacted?
You want the second location to help grow your business not hurt it so you need to make sure you have enough resources to have two successful locations. Make sure you have stable leadership and strong money flow in the first location before you start focusing all your energy into a new location. You don’t want the first location to be hurt in any way.
Can You Afford Double the Bills?
Make sure you carefully look at the dollars and cents of it all before making any final decisions. Besides all the startup costs for opening the new location, you have to consider that all your everyday expenses will double too. You will have double the rent, double the inventory and double the payroll etc. And it will take some time for the second location to be making any money for you. All this means is that you need to make sure you have the necessary extra funds to handle all this influx or you might end up running your new little empire into the ground.
One rule of thumb is to not expand to far out when opening up a second location. Jumping cities or across the country is definitely a bigger undertaking because there is so much more uncertainty and it won’t be as easy to share resources if you need to in a pinch. Start with opening a new location in the same city as your first and then as things continue to thrive, you can take your little empire anywhere you want.
Also keep in mind, that a new business loan, if you have a good credit, is a good way to get that extra capital you will need for your second location. Just remember that you will need to provide evidence that the second location will bring a solid return on the investment.
Have You Done Your Market Research?
Before opening additional locations, you need to ask yourself some hard questions and to do some digging. In order to capitalize on the success of your original location, you need to isolate what were the biggest factors that made it successful and ask yourself, can it be duplicated in a new location?
For instance, is the geographic location of your original business the key to its success? If your business caters to a certain demographic or attracts most of its customers from the busy foot traffic outside its doors, opening up a new location might not be the same guaranteed success, particularly if you set up shop at a more isolated spot.
Besides geography, you have to consider if there will be more competition in the new location. You never want to build your second location where there is heavy competition just a few blocks away.
Don’t worry though all this just takes some careful market research. Due your due diligence and not just with internet searches. Go visit the new area and talk to nearby business owners and their customers to get a feel for what it would be like to run a business in that area. Also make sure you have a good understanding of all the zoning regulations there too.
Can You Delegate?
If you love holding the reins and being in charge of every little decision, you should think twice before expanding. You can’t be in two places at once so you are going to have to hire staff you trust to help you run your businesses. Really be sure that you are not going to micromanage everything otherwise you will drive good employees away. There needs to be a lot of trust here.
The rule of thumb here is to hire someone from your current location to manage the old one so you can focus on establishing the new site. By promoting from within, you will not only build trust in your staff, you will also be able to feel confident that the new manager already has a good handle on how the business should be run.
The more locations you own, the more your financial and legal obligations become trickier so before you even sign the dotted line on any new property make sure you get schooled properly. Talk to other business owners or hire a business consultant or legal advisor to help you wade through all the financial and legal implications of opening a new location.
Keep all your business records for each location separately so they are easier to track and stay up-to-date on all the regulations that pertain to each location. They may differ a little so you don’t want to get them confused and then be penalized for missing something later.
Laws on owning multiple locations of business can vary state to state so you need to be organized. You may need to register each business separately and you may need to file as a corporate not a sole business owner.
MBB Management can help you embark on this new adventure the right way, call them today.